H.R. 2777: S-Corporation Additional Participation Act of 2025

The bill titled **S-Corporation Additional Participation Act of 2025** proposes a change in the Internal Revenue Code regarding S corporations, which are a specific type of corporation that typically allows for pass-through taxation. This allows the income, deductions, and tax credits to be passed to shareholders without being taxed at the corporate level.

Key Provisions

• The bill proposes to increase the maximum number of allowable shareholders for S corporations from **100** to **250**. This change aims to allow more shareholders to participate in S corporations, potentially broadening access for businesses and their investment opportunities.
• The new regulation will apply to taxable years that begin after **December 31, 2025**. This means that the new shareholder limit would take effect starting from the 2026 tax year onward.

Implications

By increasing the limit on the number of shareholders, the bill seeks to provide more opportunities for growth and capital infusion in S corporations. This can be particularly beneficial for small to medium-sized businesses that wish to expand their ownership base without losing their S corporation tax status. With more shareholders, these businesses may be able to attract more investment, potentially fueling further development and job creation within various sectors.

Relevant Companies